The Experts below are selected from a list of 69 Experts worldwide ranked by ideXlab platform
Nikolaos I Papanikolaou - One of the best experts on this subject based on the ideXlab platform.
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applying benford s law to detect Accounting data manipulation in the Banking industry
Journal of Financial Services Research, 2021Co-Authors: Theoharry Grammatikos, Nikolaos I PapanikolaouAbstract:In this paper, we take a glimpse at the dark side of Bank Accounting statements by using a mathematical law which was established by Benford in 1938 to detect data manipulation. We shed the spotlight on the healthy, failed, and bailed out Banks in the global financial crisis and test whether a set of balance sheet and income statement variables which are used by regulators to rate the performance and soundness of Banks were manipulated in the years prior to and also during the crisis. We find that Banks utilise loan loss provisions to manipulate earnings and income upwards throughout the examined periods. Together with loan loss provisions, problem Banks resort to a downward manipulation of allowance for loan losses and non-performing loans with the purpose to tamper earnings upwards. We also provide evidence that manipulation is more prevalent in problem Banks, which manage income and earnings to conceal their financial difficulties. Moreover, manipulation is found to be strengthened in the crisis period; it is also expanded to affect regulatory capital. Overall, Banks utilise data manipulation without yet resorting to eye-catching manipulation strategies that may attract the scrutiny by regulators. Benford’s Law appears to be a suitable tool for assessing the quality of Accounting information and for discovering irregularities in Bank Accounting data.
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applying benford s law to detect Accounting data manipulation in the Banking industry
Social Science Research Network, 2016Co-Authors: Theoharry Grammatikos, Nikolaos I PapanikolaouAbstract:Accounting standards and financial reporting systems are supposed to contribute to the transparency of the operation of the financial system by providing market participants, regulators, and supervisors with high-quality information on the financial condition of Banking institutions. Bank managers and board members, however, have strong incentives to misrepresent the Accounting and financial performance of their Banks over time, covering losses and conveying a healthy and sound image of the financial condition of their firms to the public, investors and, especially, to regulatory and supervisory authorities. Any kind of manipulation in Banking data is very likely to transmit noise in the operation of the Banking sector, as it distorts the expectations of market participants about the future price levels and, hence, about future conditions in the sector. Poor data quality seems to have played a crucial role in the formation of a number of Banking scandals that have contributed to the late 2000s financial crisis. In this paper, we rely on a mathematical law which was established by an American financial engineering and physicist called Frank Benford in 1938 to detect possible data tampering in Bank Accounting data in the years prior to the crisis. More specifically, we test whether and to what extent a set of fundamental balance sheet variables - which reflect the level of Bank soundness - were manipulated in the years before the outbreak of the crisis. The idea of detecting manipulations in Accounting (or market) data by tests of conformity to Benford's law is nowadays well established in the forensic Accounting and auditing literature. However, no relevant studies exist in the current Banking literature. This is to say, the present study contains the first application of Benford’s law in Banking. Moreover, our work is the only one that makes an attempt to identify operational discrepancies and uncover fraudulent practices in the Banking sector of the economy prior to the crisis, considering the regulatory and supervisory changes that took place in the U.S. corporate and Banking markets with the enactment of the Sarbanes-Oxley Act in mid-2002.
Theoharry Grammatikos - One of the best experts on this subject based on the ideXlab platform.
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applying benford s law to detect Accounting data manipulation in the Banking industry
Journal of Financial Services Research, 2021Co-Authors: Theoharry Grammatikos, Nikolaos I PapanikolaouAbstract:In this paper, we take a glimpse at the dark side of Bank Accounting statements by using a mathematical law which was established by Benford in 1938 to detect data manipulation. We shed the spotlight on the healthy, failed, and bailed out Banks in the global financial crisis and test whether a set of balance sheet and income statement variables which are used by regulators to rate the performance and soundness of Banks were manipulated in the years prior to and also during the crisis. We find that Banks utilise loan loss provisions to manipulate earnings and income upwards throughout the examined periods. Together with loan loss provisions, problem Banks resort to a downward manipulation of allowance for loan losses and non-performing loans with the purpose to tamper earnings upwards. We also provide evidence that manipulation is more prevalent in problem Banks, which manage income and earnings to conceal their financial difficulties. Moreover, manipulation is found to be strengthened in the crisis period; it is also expanded to affect regulatory capital. Overall, Banks utilise data manipulation without yet resorting to eye-catching manipulation strategies that may attract the scrutiny by regulators. Benford’s Law appears to be a suitable tool for assessing the quality of Accounting information and for discovering irregularities in Bank Accounting data.
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applying benford s law to detect Accounting data manipulation in the Banking industry
Social Science Research Network, 2016Co-Authors: Theoharry Grammatikos, Nikolaos I PapanikolaouAbstract:Accounting standards and financial reporting systems are supposed to contribute to the transparency of the operation of the financial system by providing market participants, regulators, and supervisors with high-quality information on the financial condition of Banking institutions. Bank managers and board members, however, have strong incentives to misrepresent the Accounting and financial performance of their Banks over time, covering losses and conveying a healthy and sound image of the financial condition of their firms to the public, investors and, especially, to regulatory and supervisory authorities. Any kind of manipulation in Banking data is very likely to transmit noise in the operation of the Banking sector, as it distorts the expectations of market participants about the future price levels and, hence, about future conditions in the sector. Poor data quality seems to have played a crucial role in the formation of a number of Banking scandals that have contributed to the late 2000s financial crisis. In this paper, we rely on a mathematical law which was established by an American financial engineering and physicist called Frank Benford in 1938 to detect possible data tampering in Bank Accounting data in the years prior to the crisis. More specifically, we test whether and to what extent a set of fundamental balance sheet variables - which reflect the level of Bank soundness - were manipulated in the years before the outbreak of the crisis. The idea of detecting manipulations in Accounting (or market) data by tests of conformity to Benford's law is nowadays well established in the forensic Accounting and auditing literature. However, no relevant studies exist in the current Banking literature. This is to say, the present study contains the first application of Benford’s law in Banking. Moreover, our work is the only one that makes an attempt to identify operational discrepancies and uncover fraudulent practices in the Banking sector of the economy prior to the crisis, considering the regulatory and supervisory changes that took place in the U.S. corporate and Banking markets with the enactment of the Sarbanes-Oxley Act in mid-2002.
Ganapathi S Narayanamoorthy - One of the best experts on this subject based on the ideXlab platform.
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did the sec impact Banks loan loss reserve policies and their informativeness
Journal of Accounting and Economics, 2013Co-Authors: Paul J Beck, Ganapathi S NarayanamoorthyAbstract:Abstract During the late 1990s, the SEC alleged that Banks were overstating loan loss allowances to establish cookie jar reserves. Their intervention in Bank Accounting culminated in 2001 with new guidance (SAB 102) designed to improve financial reporting quality. We show that Banks' allowance estimation changed in response to the SEC's intervention. While allowance informativeness (as proxied by the ability to explain future losses) improved for Strong Banks, informativeness declined for Weak Banks whose incentives are to understate allowances. Our results help to explain why some (Weak) Banks delayed loss recognition during the recent financial crisis.
Khalid Nainar - One of the best experts on this subject based on the ideXlab platform.
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organizational memory and Bank Accounting conservatism
European Accounting Review, 2020Co-Authors: Justin Yiqiang Jin, Yi Liu, Khalid NainarAbstract:This paper is the first to investigate the impact of Banks’ organizational memory of past history on the conservatism of Accounting policy. Specifically, we investigate two types of bad time histor...
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organizational memory and Bank Accounting conservatism
Social Science Research Network, 2020Co-Authors: Justin Yiqiang Jin, Yi Liu, Khalid NainarAbstract:This paper is the first to investigate the impact of Banks’ organizational memory of past history on the conservatism of Accounting policy. Specifically, we investigate two types of bad time history: Banks’ undercapitalization and the failures of other Banks during financial crises. Using a large sample of U.S. Banks over the period 1997-2013, we find that both types of bad times are positively related to timelier recognition of earnings decreases versus earnings increases in Accounting income. We also find that following bad times, Banks increase their allowance for loan losses. The results of path analysis and survey research indicate that bad time memory of Banks impacts Bank Accounting conservatism through CEO tenure and board of directors’ tenure. Collectively, our results suggest that Banks’ organizational memory of bad times and macro-level Banking crises lead to greater Accounting conservatism in Banks.
Paul J Beck - One of the best experts on this subject based on the ideXlab platform.
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did the sec impact Banks loan loss reserve policies and their informativeness
Journal of Accounting and Economics, 2013Co-Authors: Paul J Beck, Ganapathi S NarayanamoorthyAbstract:Abstract During the late 1990s, the SEC alleged that Banks were overstating loan loss allowances to establish cookie jar reserves. Their intervention in Bank Accounting culminated in 2001 with new guidance (SAB 102) designed to improve financial reporting quality. We show that Banks' allowance estimation changed in response to the SEC's intervention. While allowance informativeness (as proxied by the ability to explain future losses) improved for Strong Banks, informativeness declined for Weak Banks whose incentives are to understate allowances. Our results help to explain why some (Weak) Banks delayed loss recognition during the recent financial crisis.
